Grieg Seafood is poised to add another building block to the nascent green bond aquaculture sector, despite a European Commission anti-competitive behaviour investigation hanging over the company.
Grieg's proposed Norwegian krone senior unsecured five-year note would make it only the second borrower in the aquaculture sector to issue a green bond, according to IFR data.
It will follow fellow Norwegian seafood producer Mowi, which joined the ranks of corporate borrowers issuing green bonds that burnish their ESG credentials.
Mowi priced a €200m five-year non-call three unrated floating-rate transaction in January that, with demand of over €700m, opened the gates for fish farming companies looking to tap the green bond market, according to bankers speaking to IFR at the time.
"We are considering issuing a green bond now because we recently launched an ambitious strategy for sustainable growth towards 2025 and would like to have options for financing the investments," said Grieg Seafood CFO Atle Harald Sandtorv.
"There are few such bonds in the seafood industry, so it will be an opportunity to diversity portfolios."
Grieg has a second opinion issued by the climate research institution Cicero, which scored the green bond framework 'medium green', said Sandtorv.
Sandtorv said the company has multiple projects planned that aim to reduce the environmental impact from its operations and value chain, and to improve the health and welfare of its fish.
"This is an ethical responsibility, but it is also key to reach our operational and financial targets," he said. "We feel that these projects fit well within a green bond framework."
The results of the projects will in turn improve Grieg's operational and financial performance, said Sandtorv.
One example of these projects includes post-smolt facilities with recirculating technology. That involves keeping the fish longer in land-based facilities and reducing time in the sea, Sandtorv said.
The idea is that the fish will be more robust when they enter the sea phase - because they would be less exposed to diseases, sea lice and harmful plankton - and will increase survival rates. The aim of the technology is to decrease the environmental footprint of the fish and also the company's cost, said Sandtorv.
The company has other projects on the go that aim to improving fish health and welfare and reduce its carbon footprint.
"These projects are win-win for the environment, fish welfare and company profits," said Sandtorv.
"If we decide to issue the green bond, it will be an opportunity for investors who care about the environment, animal welfare and profits combined."
DNB Markets and Nordea are bookrunners and green bond advisers. Investor calls began on Friday.
Some of the deal's features, such as the call period and whether it will be in fixed or floating-rate format, are still under consideration.
ESG CONSIDERATIONS
While the Nordic green bond market is dominated by Swedish debt, neighbouring countries are gradually catching up.
The non-Swedish Nordic supply of green bonds increased by more than 90% last year, according to market players.
But as with all new or expanding sectors of the market, there have been some hiccups.
In February 2019, the European Commission launched an investigation to explore potential anti-competitive behaviour in the Norwegian salmon industry.
Grieg Seafood and Mowi are two of the companies under investigation.
The investigation won't necessarily affect the green nature of the bonds involved, and Mowi's green bond was comfortably oversubscribed. But it could be taken into consideration by investors with an ESG element to their investing.
One green bond investor, who said he wasn't familiar with either Grieg Seafood or Mowi, said he would "absolutely take into account any material ESG-related concerns in our diligence whether it was a green bond or not".
"We would be very unlikely to invest in a company that was being formally investigated for price fixing as a direct reflection of weak governance," he said.
Based on the EU investigation, US competition authorities launched their own investigation in November, and class-action lawsuits have been filed by some customers.
"Grieg Seafood is not aware of any anti-competitive behaviour, not in Norway, the EU, the US nor in any other countries where we operate," said a spokesperson, who confirmed the investigations.
"We are fully collaborating with European and American authorities in this matter, and are following up the lawsuits legally."
Mowi did not immediately respond to a request for comment.